NEW YORK: Crude oil may fall this week on speculation that US refineries will increase stockpiles after cutting supplies in December to lower tax payments.
Twenty-one of 39 analysts surveyed, or 54%, said oil prices will decline through January 18. Nine of the respondents, or 23%, said futures will increase, and nine predicted little change. Last week, 52% of respondents said oil would rise.
US crude-oil inventories declined 31.8mn barrels in the past eight weeks, according to an Energy Department report on January 9. US refineries usually cut oil supplies by late December because some states levy taxes on the amount in storage at year’s end. Stockpiles rose in January for the past four years.
“The drop in crude oil stocks for last week was pretty clearly a move by Gulf Coast refiners to avoid state ad-valorem taxes on year-end crude oil inventories, a big tax at a $95.98 per barrel year-end price”, said Tim Evans, an energy analyst at Citigroup Global Markets Inc in New York.
Prices fell last week on concerns that the global economy will slow, reducing fuel demand. Goldman Sachs Group warned that the US and Japan are at risk of recession this year.
“Once the market sees US crude stocks rising, we think it will also pay more attention to the degree that demand has fallen short of expectations,” Evans said.
Crude oil for February delivery had dropped $4.20, or 4.3%, to $93.71 a barrel last week on the New York Mercantile Exchange. Futures reached a record $100.09 on January 3.
Meanwhile, the Opec secretary-general has said that speculators had driven oil prices to record highs rather than any supply shortage and that Opec was ready to boost output when the market needs more.
In an interview published yesterday, Opec Secretary-General Abdullah al-Badri said a slowing global economy would not impact demand in the short term or lead to a price collapse.
He told Cyprus’s Phileleftheros newspaper; “There is no shortage in the market... We are ready to supply the market with additional quantities of oil if basic market fundamentals justify such a move.
“In my view, the basic reason for which we have been seeing higher prices since last September is because of speculation.”
International political tension and a weak dollar have also contributed to the price rise, Badri said.
Opec, source of more than a third of the world’s oil, would monitor the market closely in the run up to its next meeting on February 1, Badri said.
Opec officials have said there is little that they can do to tame $100 oil, despite concern among some members of the economic impact of high energy costs.
“At present there is a weakening in the global economy, but I do not think that the price of oil will collapse,” Badri said. “Nor will this... have a notable impact in the development of demand in the coming months.”
Badri said he expected oil prices to remain volatile in 2008.
At its last meeting in December, Opec kept oil output unchanged, rebuffing calls from consumer countries for more supply to rein in prices then trading around $90.
Badri is due to visit Cyprus on Wednesday as a guest of the Nicosia Chamber of Commerce and Industry.
Refining sources have said Saudi Arabia was unlikely to offer extra crude for February to Asian buyers, even after oil hit $100 last week, as most refiners have little need and ability to process additional heavy sour crude.
The kingdom raised term exports to Asia by a tenth for November to full contracted volumes in response to a jump in prices past $80 a barrel for the first time in September.
Opec’s largest exporter has kept supplying at full volumes since November and could offer more in an attempt to cool down prices as the country has the largest spare output capacity.
But refiners said they did not need much more Arab Light, Medium and Heavy grades that Saudi Aramco could offer because they can get higher-quality grades from alternative sources such as West Africa, albeit at higher prices.
“We can use many other grades on the market,” a trader with a refiner said, adding that the company had not requested extra barrels.
Allocations for February could be released over the weekend or today, and most buyers expected them to be steady.
Saudi Arabia is believed to have discreetly supplied small additional volumes to Asia for January after some buyers requested extra barrels.
A few customers are believed to have asked for additional volumes for February.
One possibility is India, where refiners are negotiating their April 2008-March 2009 term volumes with Saudi Aramco and are expected to seek larger contracts as new complex plants, such as Reliance’s 580,000 barrels per day facility, come on stream.
China has ramped up its imports of Saudi crude by a third for 2008 from 2007, lifting imports to around 720,000 (bpd), making it unlikely to ask for additional volumes. - Bloomberg, Reuters